Review hits Metra board for lack of oversight

October 20, 2010

Without a law requiring them to do so, Metra's board of directors did nothing to review or approve actions involving executives' pay, benefits and expense accounts at the commuter rail agency for years, leaving those decisions entirely to former Executive Director Phil Pagano, a new report has found.

No "material violations of any laws" were found to have been committed by Metra employees, including Pagano, during the review of Metra pay policies since 2000, but the report by the accounting firm Ernst & Young said there were "variations" from Metra policies and practices.

For example, although Metra has 23 employees with jobs that require an agency vehicle on a 24/7 basis, the list is neither dated nor signed, and no supporting documents could be found, the review said.

In addition, the review found instances when expense account policies were not followed, including executives upgrading their airline tickets on Metra's tab.

"Metra's executive compensation programs were not monitored (or) audited on a periodic basis by internal audit, a board sub-committee or outside advisors to evaluate for compliance with policies, procedures and controls," the review stated.

In a response, Metra Executive Director Bill Tupper disputed nearly all the report's findings and recommendations. Metra's directors, the rail agency said, has already taken steps -- even before the report was created -- to monitor executive pay and to review compliance with policies. Metra also said the report contained several errors.

The Ernst & Young report made no mention of the finding by Metra special investigator James Sotos that Pagano took $475,000 in unapproved vacation pay, and forged the name of Metra's chairwoman to cover up the most recent payments. Pagano committed suicide May 7, just as Metra's board was poised to fire him.

The 64-page review was commissioned by the Regional Transportation Authority and is expected to be presented to the RTA board Thursday. The Tribune obtained a copy.

State Sen. Susan Garrett, D-Lake Forest, criticized the review, calling it a "watered-down" effort on the RTA's part to correct mismanagement at Metra.

Under the terms of its contract, Garrett said, Ernst & Young was not obliged "to conduct a review to detect fraud or illegal acts."

She said additional legislation is needed to ensure oversight and transparency at the transit agencies.

"In this case it's absolutely critical that the legislature step in and ensure that we have permanent, long-term guaranteed reforms in place," Garrett said.